Asymmetry in Earnings Timeliness and Persistence: A Simultaneous Equations Approach

41 Pages Posted: 2 Apr 2008 Last revised: 19 Sep 2012

See all articles by William H. Beaver

William H. Beaver

Stanford University

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Edward Owens

University of Utah - David Eccles School of Business

Date Written: December 20, 2010

Abstract

This study addresses simultaneity bias in piecewise linear forms of the earnings-return relation. We specify an overidentified system of simultaneous equations that incorporates both asymmetric earnings timeliness and asymmetric earnings persistence specifications, and implement two-stage least squares for this piecewise linear system. Estimation of such a system that is piecewise linear in endogenous variables presents several distinctive issues for which there exists no precedent in the accounting literature. Findings provide evidence that the asymmetric timeliness specification is particularly affected by simultaneity, and that failing to correct for simultaneity results in coefficient estimates that understate the degree of asymmetric earnings timeliness. Moreover, our findings suggest that asymmetric earnings timeliness has dissipated, not increased, over time when simultaneity is taken into account.

Keywords: Conservatism, Earnings Persistence, Returns-Earnings Relation

JEL Classification: M41, M44, C33

Suggested Citation

Beaver, William H. and Landsman, Wayne R. and Owens, Edward, Asymmetry in Earnings Timeliness and Persistence: A Simultaneous Equations Approach (December 20, 2010). Review of Accounting Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1115486

William H. Beaver (Contact Author)

Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-4409 (Phone)
650-725-6152 (Fax)

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Edward Owens

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
8015815732 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
912
Abstract Views
2,946
rank
24,800
PlumX Metrics